What Is Real Estate Capital Gains Tax?

According to Article 80 of the Income Tax Law No. 193, if a property is sold within five years from the date of acquisition, the profit arising from the sale becomes subject to taxation. However, not every sale transaction falls under this tax; certain exemptions apply. For example, the sale of properties acquired through inheritance or as a gift (without payment) is exempt from the capital gains tax. In other words, if a parent gifts a house to their child, there is no obligation to pay tax on any income obtained from its sale. For taxation to apply, the profit from the sale must exceed the exemption threshold set by law. If the profit remains below this limit, no tax liability arises. Therefore, before selling a property, it is essential to consider both the method of acquisition and whether the expected profit surpasses the exemption threshold.

How Is the Capital Gains Tax Calculated?

The Capital Gains Tax is calculated based on the profit derived from the sale of real estate. This calculation relies on the Domestic Producer Price Index (D-PPI) data published monthly by the Turkish Statistical Institute (TÜİK). These rates reflect the change in the property’s value over time. Typically, the D-PPI rate of the previous month is used in the calculation.

The main elements considered in this calculation are:

• Purchase price and purchase date

• Sale price and sale date

• Any related expenses (such as title deed fees)

Nowadays, several online calculators allow individuals to estimate their approximate capital gains tax. For official inquiries, taxpayers can contact the Turkish Revenue Administration through its hotline 189 or call center 444 0 189.

For those who prefer manual calculation, the process is straightforward:

1. Multiply the property’s purchase price by the D-PPI rate of the previous month to determine its adjusted current value.

2. Subtract this adjusted value from the sale price to find the gross profit.

3. Deduct the annual exemption amount from this profit to obtain the taxable base.

4. Subtract any deductible expenses, such as title deed fees, from the taxable base.
   The remaining amount represents the Capital Gains Tax payable.

What Is the Exemption Threshold?

The exemption threshold defines the income level above which profits from real estate sales become taxable. In simple terms, if the gain between the purchase and sale price is below this threshold, no capital gains tax is due. This limit is updated annually by the Turkish Revenue Administration (GİB) based on economic indicators and publicly announced.

For example, in 2017, individuals who sold their property and earned less than 14,800 TL in profit were exempt from paying tax. Those exceeding this amount were required to file a tax declaration by June 20 of the following year. The declared capital gains tax is payable in two installments — the first in July and the second in August. To check the current exemption limits, visit the GİB’s official webpage titled “Değer Artışı Kazançlarına İlişkin İstisna Tutarı” (Exemption Amount for Capital Gains).

Cases Where Capital Gains Tax Does Not Apply

Not every real estate sale is subject to capital gains tax. Certain situations are exempt because there is no actual profit or sale transaction involved. For example:

• Properties transferred to a spouse, child, or inherited are subject to inheritance and transfer tax instead, not capital gains tax.

• Properties donated to charities, foundations, or public-benefit organizations are also exempt.

• Similarly, gratuitous transfers (where no payment is made) do not create any tax obligation.

For capital gains tax to apply, the transaction must involve a genuine sale generating profit, conducted for commercial purposes, and not as a free transfer. If these conditions are not met, no tax liability arises.

Which Properties Are Subject to Capital Gains Tax?

According to regulations set by the Turkish Revenue Administration, the capital gains tax applies only to specific types of real estate and property rights. These include:

• Land and plots

• Buildings

• Mines and mineral springs

• Sand and gravel extraction sites

• Stone quarries, brick and tile production areas

• Saltworks, fish farms (voli mahalleri), and fishing weirs (dalyans)

• Ships and ship shares

• Motorized loading and unloading equipment

• Property rights registered in the land registry

In summary, all properties or rights registered in the land registry, or those recognized as having real estate value, may be subject to capital gains tax if sold within five years of acquisition. Therefore, before selling, it’s crucial to verify whether the property type and sale date trigger a tax obligation.